THE TRUST CENTERED PLAN, Revocable and Irrevocable Living Trusts

by George R. Adams Esq.  


I have a question for you.  Should there be a living trust in your future? 

Some of you may be asking, what is a living trust? What does a living trust look like?  Actually, a living trust sounds more complicated than it actually is.  You may think of a living trust as a tool which is used to achieve your goals and objectives as regards yourself and the objects of your bounty.

A living trust has four main components: 1) the grantor, the person who establishes the trust, 2) the trust assets, the corpus of the trust 3) the trustee, the person or entity that administers the trust and 4) the trust beneficiary(s), the person or entity for whose benefit the trust is established. The trust is governed by a signed trust agreement between the grantor and the trustee and is typically accompanied by a “pour over will” that will dispose of any assets that have not been transferred to the trust during the grantor’s lifetime. One might say that the trust agreement constitute the “instructions” of the grantor as to the disposition of the trust assets.

A trust can either be revocable or irrevocable.  A revocable trust can be amended or revoked during the lifetime of the Grantor provided the grantor is legally competent to do so.  An irrevocable trust is designed to be irrevocable by the Grantor typically for tax reasons or asset protection.

The benefits of establishing a revocable living trust are 1) disability protection in the event of grantor’s incapacity 2) avoidance of probate (i.e., the court process of settling an estate which involves inventories, publications against creditors, and accountings).  3) privacy (the disposition of the trust is between the grantor and the trustee and at the grantor’s death does not become a public record). 4) a means to provide for one’s spouse or other beneficiary after the grantor’s death.  5) a means to provide asset protection for one’s spouse and/or children. Revocable trusts do not help avoid estate tax because the grantor’s power to revoke or amend the trust causes its value to be includable in grantor’s estate.

The downside of a living trust is that it requires the grantor to go to the effort of “pre-settling” the estate of the grantor during the grantor’s lifetime.  Instead of just executing a will during the grantor’s lifetime and leaving the settlement of the grantor’s estate to his or her executor at grantor’s death, the grantor must set up a trust during his or her lifetime and transfer title to the trust into the name of the trust.  The positive aspect to this requirement is that the grantor is assured that his or her plan is going to be carried out according to his wishes.  The positive or negative side to a probate administration, depending on how you look at it, is that the court oversees the settlement of the estate; whereas, in a revocable trust situation, the grantor relies on the trustee to carry out his or her wishes.


Children come in all sizes, shapes, conditions, addictions and personalities.  As parents, we have different approaches to how we want to treat our children when we are gone.  What we many times don’t realize is that the decision regarding how we leave our estates may be the most important decision we make regarding our children.  Let’s look at some of the possible scenarios involved with planning for our children.

You Die and Leave Children as Beneficiaries

Suppose you are leaving your estate to your children and they are minors, what are some of the considerations that you should be thinking about? Ask yourself, what would your child do with hundreds of thousands or perhaps millions of dollars worth of assets if tomorrow he or she were to inherit the assets of your estate?

Screnario #1: The Court Appointed Guardian

If you child is a minor, I suggest that you should be thinking about avoidance of the time, rigidity and expense of a Court appointed Guardian of the property.  This can be accomplished using a children’s trust.

Screnario #2 : The Loss of the Child’s Work Ethic   Sometimes when children know they are going to inherit a large sum of money it changes their work ethic and approach to life.  You may not want your child to know how much he or she would inherit under those circumstances.  This can be accomplished using a children’s trust.

Screnario #3: Lack of Financial Maturity

Your children may not be financially mature enough to receive a large sum or sums of money at their current age.  Examples abound of children engaging in lavish weddings, sports cars and frivolous wasting of assets that you and your spouse have worked to build over your lifetime with a view to financial security for the surviving spouse and the children.  You can mitigate this wasting by using a children’s trust.

Screnario #4:  The Bad Marriage

You may be concerned about your child’s potentially bad marriage.  Divorce is very common in modern society and it is not uncommon for the divorcing spouse to share in your child’s inheritance.  You can avoid this problem using a children’s trust.

Screnario #5: Health Problems

Your child may have a health problem or in need of college funding.   The guarantee of financial support can be provided using a children’s trust.

Screnario #6: Creditor Protection

You may be concerned about creditor protection for your child.  Your assets can be protected during your child’s lifetime through the use of a children’s trust.

Screnario #7: Substance Abuser

Your child may be a substance abuser who would go through the inheritance in a very short time.  A children’s trust can provide a means to cope with this problem.  For example, in such a case you may want to consider using a professional trustee who would bring an objective viewpoint to the situation.  Another potential solution would be to annuitize the benefits from the assets and limit cash flow to the child to remove the temptation to indulge in the child’s addiction.

What You Don’t Want Regarding your Children as Beneficiaries 

            Indolence arising out of the loss of the work ethic. Many times when a child receives a large sum of money, he or she will tend to “live off the land”.

Family conflictIn a situation where there are more than one child, the situation can prove to be a prescription for family conflict.  

          The Family Business or inheritance frittered away.  The children may not have the same loyalty to the family business as the parents.  Consider business succession planning for such a situation.

In relative we trust  Some people leave their assets to a relative outright with the request that that relative use the assets for the benefit of the child. The problem with this approach is that the relative may die or commit a negligent act and be sued with the assets ending up with the creditor and not your child.  A children’s trust would avoid this situation.

The good feature of a trust for the benefit of your children is that to a large extent it can be drafted to satisfy all or part of these concerns.  It helps to have a qualified advisor to assist you who has been down this road and who has seen first hand the consequences of good and bad planning.

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